January 19, 2008 in Business

Missing tax credit imperils wind farms

Newhouse News Service The Spokesman-Review
 

PORTLAND – Congress’ failure to include a renewable energy tax credit in the much-touted energy bill passed late last year could slow wind-farm development, industry and utility leaders say.

For several years, wind developers have taken advantage of a tax credit based on the amount of energy a project generates. That incentive is to expire at the end of this year.

“Manufacturers need to plan far beyond that,” said Ditlev Engel, chief executive of the world’s largest wind turbine supplier, Vestas Wind Systems of Denmark. Vestas’ North American headquarters is in Portland, where Engel addressed a local business group this week.

The production tax credit has helped fuel three record-breaking years of wind-farm development. The American Wind Energy Association says 5,244 megawatts of wind energy were installed last year, more than double the previous two years combined.

Oregon and Washington have set records with projects along the Columbia River Gorge’s windy corridor. Several wind projects in the gorge use Vestas turbines.

The production tax credit has been around since 1992, but it has relied on a series of extensions to stay alive. From 1999 through 2004, the credit expired three times, and development dropped dramatically each time.

The credit, adjusted for inflation, stands at 2 cents per kilowatt hour and applies to the first 10 years of a renewable energy facility’s operation.

Costs associated with wind energy vary significantly. But the credit can bring the price of wind-generated electricity down to about 5 cents per kilowatt hour. That’s competitive with more traditional forms of energy such as natural gas.

Wind energy advocates say they’re confident they can persuade lawmakers to squeeze the tax credit into an upcoming bill. But they could run into opposition from those who want to shore up the federal budget and limit subsidies.

Last time around, Republicans balked because the money lost to the production tax credits was to come from cuts to oil and gas industry subsidies.

Sen. Ron Wyden, D-Ore., who sits on the Finance Committee, “will pull all the stops to make it happen,” said his spokesman, Tom Towslee.

Wind energy isn’t the only renewable resource to get the cold shoulder in the federal energy bill. An investment tax credit that the solar industry used was sliced in last-minute political wrangling.

Big wind-industry players such as Vestas aren’t yet cutting back. The company will open its first U.S. manufacturing plant in March in Colorado and will decide on a location for a U.S. research and development facility this year.

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